Intel is on the verge of exiting the smartphone and tablet markets after cutting Atom chips

Intel could be on the verge of exiting the market for smartphones and standalone tablets, wasting billions of dollars it spent trying to expand in those markets.

The company is immediately canceling Atom chips, code-named Sofia and Broxton, for mobile devices, an Intel spokeswoman confirmed.

These are the first products on the chopping block as part of Intel's plan to reshape operations after announcing plans this month to cut 12,000 jobs.

The news of the chip cuts was first reported by analyst Patrick Moorhead in an article on Forbes' website.

Resources originally dedicated to Broxton and Sofia chips will be moved to "products that deliver higher returns and advance our strategy," Intel's spokeswoman said in an email.

Intel's mobile chip roadmap now has a giant hole after the cancellation of the chips. Intel's existing smartphone and tablet-only chips are aging and due for upgrades, and no major replacements are in sight. Sofia is already shipping, and Broxton was due to ship this year but had been delayed.

Intel is also discontinuing its Atom X5 line of tablet chips code-named Cherry Trail, which is being replaced by Pentium and Celeron chips code-named Apollo Lake, aimed more at hybrids than pure tablets. Many PC makers are already choosing Intel's Skylake Core M processors over Cherry Trail for hybrids and PC-like tablets.

Intel doesn't view tablets as a standalone market any longer, with form factors quickly merging. The company will continue to support current tablet customers with existing chips, the Intel spokeswoman said.

Some products were on tap to get axed after Intel said it would review product lines and projects while restructuring operations. Intel had already deemphasized its bread-and-butter PC business, and the plan to also cut the mobile chips may be smart.

The company poured billions of dollars into its mobile business, but Intel failed to unseat market leader ARM. Atom is available in just a handful of smartphones, and the tablet market is declining. PC makers are replacing tablets with detachable devices and hybrids.

The Atom product line has been in trouble for some time. Atom started off with a bang in netbooks, but its fortunes have sagged since then. Intel's mobile chip updates haven't followed a set timeline, and the last Atom chips for servers were released in 2013.

Intel's mobile strategy is now tied up with 5G, and resources originally dedicated to Sofia and Broxton could be redirected in making 5G chips and modems. The new 5G networks could provide 100 times faster data throughput than 4G, and deployments are expected to start around 2020.

The move to 5G could change the way devices are made. Beyond mobile devices, it will bring speedy mobile connectivity to PCs, smart home devices, robots, drones, wearables, and industrial Internet of Things devices.

The focus on 5G also explains the retention of key mobile executive Aicha Evans by Intel. Earlier this month, it was reported that she was leaving the company after a year of leading the mobile chip business. But she's a 5G expert and has already outlined the company's strategy in that area. She will be staying at Intel, though her role is unclear.

The commitment to 5G is a long-term play for Intel, much like its Centrino wireless strategy in 2003 that ultimately made Wi-Fi a ubiquitous feature in laptops. The 5G move also plays into Intel's preference to focus on future technologies.

Atom's future could also be in the fast-growing Internet of Things market, which the chip maker is betting on. Variants of the Broxton chip could be used in smart gadgets and sensor devices that collect telemetry, which is then sent to the cloud for analysis.

Intel's main focus will continue to be on Xeon server chips, cloud computing, field-programmable gate arrays (FPGAs), and silicon photonics.

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